An Empirical Investigation of The Performance of Privatized Firms: Evidence From Nigerian Stock Exchange
The public enterprises have generally failed to provide the social and economic development needed by the post-independence era in Africa, hence privatization has been central to policy making since the mid eighties. This paper offers insight into the validity of the efficacy of privatization by investigating not only whether privatization has improved the financial (profitability) performance of firms but also whether such improvement has impact on the operational efficiency of privatized firms for the period 1990-2001 in Nigeria. Using a panel data for a sample of 20 privatized firms obtained from the Nigerian Stock Exchange and Securities and Exchange Commission, the result shows an increase in all the profitability ratios after privatization. However, only the return on assets and return on sales are significant in explaining the difference between pre- and post-privatization performance of firms in Nigeria. The result of the operational efficiency shows a significant increase in the mean (median) values of sale efficiency and income efficiency. Interestingly, while output (real sales) and employee income of firms significantly increase after privatization, the number of employees insignificantly decreases after privatization. The paper concludes that privatization in Nigeria has worked in the sense that it improves the financial and operational efficiency performance of firms.